Launching the NS&I Green Bond
Back in March 2021, Rishi Sunak announced the introduction of a new product designed to help the UK lower its carbon emissions: the NS&I green bond.
In October, just days before the opening of the COP26 summit, NS&I provided more details about the bond that the chancellor has labelled a “world first”.
Keep reading for everything you need to know about the bond, including the rate on offer, how your money will help the environment, and whether you should invest.
NS&I will keep your invested money safe while funding “green” projects
NS&I is government-backed, which means your invested money is safe. You are effectively lending to the government, and in return – in the case of the NS&I green bonds, at least – the government will use your money to help fund green projects.
The projects are designed to help the UK achieve its zero-net-emissions targets. They will include initiatives to make transport cleaner, speed up the switch to renewable energy, improve energy efficiency, help to control and prevent pollution, protect the country’s living and natural resources, and help the UK adapt to climate change.
When he announced the new product, which he referred to as “the world’s first sovereign green savings bond for retail investors,” Sunak pledged bonds worth at least £15 billion to help the government transition the UK to net-zero carbon emissions by 2050.
The fixed-interest bonds offer 0.65% interest over 3 years
The green bonds launched 22 October 2021 with a rate of interest – fixed over three years – of 0.65%.
Anyone over the age of 16 who has a UK bank account can deposit between £100 and £100,000. The fixed interest will accrue daily, be added to your investment annually, but only be payable on maturity.
This means that your investment will be tied in for three years and pay out three years’ worth of interest in one go. The interest is taxable, although, for the 2021/22 tax year, basic-rate taxpayers can receive tax-free interest up to £1,000. The allowance is £500 for higher-rate taxpayers, while additional-rate taxpayers have no allowance.
Once you make your investment, you will have a 30-day cooling-off period, after which your money will be tied up until maturity.
The bonds are only available online, through the NS&I website, and are currently available until at least 22 January 2022.
With better rates available, you’ll need to think carefully about your priorities
If you are investing solely to accrue interest, then the NS&I green bond is unlikely to be the right choice for you. There are fixed and variable easy access accounts currently paying better rates of interest.
By way of comparison (as of 8 November 2021), Cynergy Bank and Shawcross Bank offer easy access accounts with variable interest rates of 0.66% and 0.67%, respectively. SmartSave and Zopa, meanwhile, offer fixed-rate bonds at 1.43% and 1.35%, respectively.
Your priorities might extend beyond the returns you see. With climate change high on the global agenda following the COP26 summit in Glasgow, you may be looking to use your money to make a difference in the battle against the climate crisis. If aligning your investments with your values on green issues is a high priority, you will likely be more tempted by the NS&I green bond.
The ability to see a 0.65% return, in the knowledge that your money is safe and that it will be helping the UK government to meet its “green” targets might be a sufficiently good reason to invest. This is especially true if you know you won’t need the invested money for the next three years.
Be sure to speak to us before you choose any new investment, and we can help you decide if it’s the right choice for you.
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Whether you are looking to better align your portfolio with your values or you are investing for the first time, the new NS&I green bond is worth considering.
The investment you make is safe – thanks to being backed by HM Treasury – and you’ll be helping to fund green projects here in the UK.
If you would like to discuss green investments or any other aspect of your long-term financial plans, please get in touch and find out how our team of expert planners can help.
Please note
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.